How I created an online casino

There is no casino advertising and gambling propaganda, there is also no step-by-step instructions on how to create a casino. This is not HYIP or bragging - just the story of a lawyer who in early 2018 decided to create an online casino, and now shared it.

# Why casino

The idea of ​​creating a casino came to mind for several reasons:

It became boring, since one stable business had already been built (I’ll explain more below) and delegated part of the operational tasks for slow but steady scaling (quantum jumps in such a business are extremely rare)

Thanks to the current business, I often communicate with the owners and top managers of online casinos, betting sites, daily fantasy sport or skill games projects, as well as gambling games built on blockchain technology. Good envy spurred.
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# Business experience

I have already created the international law firm LAWBOOT, which focuses on serving the IT, Gambling and FinTech business, and over the past 6 years has gained hundreds of useful contacts, including in the online gambling niche.

For me, jurisprudence is not just a craft, but a way to get acquainted with people I would never get to in my life, for example, from Forbes Top 500

I tried to create IT projects, for example, cashback service, but there is nothing to boast, except for valuable experience.

# Dirty business

In our society, it is considered that gambling is a dirty business.

I will not argue, in part this is true, but there are plenty of pure and legitimate projects in the world. There is no place for deception, because AML (anti money laundering) checks are carried out, sites are licensed by government agencies, and back-end elements (for example, random number generators) are certified. The ultimate goal is to create just such a project.

Components of online casinos:

- Legal part
- Financial instruments
- Soft
- Traffic
- Support
- Team

# Legal part

Everything is captured here, because creating a gambling structure with a license, for example, Curaçao, LAWBOOT can be done in 1 calendar month, and certified lawyers in Denmark taught the correct application of the GDPR.

Components:

• License to organize online gambling
• Two legal entities. The first company must be registered in Curaçao (to obtain a license), the second in Cyprus (it opens the opportunity to cooperate with European banks and Payment Solution providers)
• Documentation on the site. It is created with the aim of streamlining the relationship between the players and the service, removing risks from the company, legally blocking Internet fraudsters, and so on.
• Bringing the site into compliance with the law of the GDPR, so as not to get a fine of 20 million euros
• Automated legal support. Necessary to automate the support service and monitor the behavior of players

Best Start Solution - Curacao License

#Financial instruments

Here, too, everything is perfect, because the financial partners of LAWBOOT, who make pay-in and pay-out payments to casino players, are in the TOP-10 in the gambling niche. These are British, German, Latin American, Cypriot and Maltese banks and payment service providers.

Within two or three weeks from the moment of receiving the license, it is possible to open the first bank account and activate the processing of customers who use Visa or MasterCard.

Components:

• Bank accounts in Europe and Latin America
• Payment Service providers for processing of bank cards and electronic money, including the regions of Europe, Asia, Latin America, etc.
• Licensed cryptocurrency exchangers for processing or exchange of cryptocurrency for Fiat, and vice versa.

# Soft

The situation with the software is complicated. To assemble a team (under the front-end and back-end) with the experience of creating an online casino is incredibly difficult / long and expensive, and the risk to make a non-working product is high (my client made such an error once).

A business model was considered with the creation of a so-called “blockchain casino” based on, for example, etherium. I dropped it due to the fact that I was already late with the ICO, but I did not see any obvious advantages.

I decided to look for White Label software.

What I found out in the process:

1. setting and customization of software for the project will be made 4 months ( there is no guarantee that no longer);
2. the quality of work (and feedback) of programmers will be low;
3. payment in advance, and the amount for sensible products with customization from 100k EUR;
4. it is necessary to pay monthly support and 10-25% of royalties from profits. Paying% of the profit is not a problem, but a monthly support service eats up the budget , especially if you don’t start on time.

A license to organize online gambling is issued only when the software is 100% ready. The regulator gets access to the demo account and checks.

#Marketing

Gambling requires a constant flow of traffic. The principles applicable to the SaaS projects I know do not work here.

If month over month growth (MoM) is a gambling project in the range lower than 1.3-1.7, then the chances of survival tend to zero

Automated advertising in Google Adwords, Facebook, VK, etc. without local licenses to organize gambling on the Internet is impossible (platforms banyat). Cheat and bypass the lock - illegally and short-lived.

For example, Google Adwords explain:

It is possible to target Malta residents only if the casino or bookmaker has a Malta gambling license. With the Malta license, it is forbidden to target British users, since a UK gambling license is required.

In the gambling industry, online traffic is bought from webmasters via CPA grids (they also use synonyms: adnetwork, affiliate program), or directly from content projects. Once again, thanks to the main business, the doors were open. LAWBOOT focuses not only on the IT and gambling business, it provides legal services to arbitragers and affiliate marketing projects (including the CPA grids mentioned above).

ps Therefore (by analogy with the idea of ​​launching a casino, see the beginning of the article) a couple of years ago I had an idea to create a cashback service.

Let's continue the topic of marketing:

Adware integrations with YouTube and Instagram bloggers are popular.

By the way, the situation with bloggers is favorable, because many bloggers are clients of my law firm (again a coincidence) and they advertise bookmakers and online casinos.

This does not mean that Instagram or YouTube allow advertising of gambling, rather, on the contrary, bloggers receive strikes and bans of channels and accounts. Our team helps such bloggers (even with the TOP 50 Russian-speaking YouTube) get out of the ban. In this way we get to know and then maintain friendly and business relationships.

#Investments

I am scrupulous about this issue, because attracting investments and “pushing them into the toilet” is the lot of startups who are dreamers who sit in coworking, drink smoothies and discuss how their project will change the world for the better.

I know the price of money, and I understand the level of responsibility for failing to fulfill promises

It so happened that investors, to whom I can turn, are ready to invest in me and my projects (thanks to my personal reputation). The only question was the readiness to make an offer to the investor and take responsibility for the fulfillment of obligations.

#Weak spots

Weaknesses - software and marketing.

Failed to get insights of other market participants on the main metrics of online casinos:

- Churn (or Retention Rate),
- LTV (Lifetime Value),
- CAC (Customer Acquisition Cost),

Consequently, I could not give the figures close to reality (display in the business plan) to the investor.

# Why investment and not equity

To conduct the test you need a ready-made White Label, legal and financial instruments.
Creating a MVP without a command is pointless.

Considering the option to buy White Label and create a legal and financial structure for personal money. The goal is to conduct a test and make sure that the main metrics are within the normal range, and then sit down at the negotiating table with the investor and take money with less risk exclusively for marketing (for the purchase of traffic).

Minuses:
If the test fails, I lose more than 150k EUR (for me this is a significant amount).

Pros:
If the test result is satisfactory, the risks of the investor are reduced, therefore you can bargain for the size of the investor’s share.

In my thoughts I found myself thinking that regardless of the source of funding, I have to be sure that everything will work, otherwise I’m no different from the above-mentioned startups who sit in co-working, drink smoothies and discuss how their project will change the world for the better.

# Meeting with the traffic provider

I called a client of my law firm, which has a number of Internet sites promoting online gambling.

Heard opinion:

Gambling traffic is getting more expensive, competition is extremely high, it seems that casinos and bookmakers buy their traffic in minus

Creating a cashback service a couple of years ago, I came up with an example when big companies buy traffic on certain marketing channels to themselves in the minus in order to prevent competitors from growing on these channels.

I will give a simple example (the names below are fictional):

The brand SuperBrand is on the market - a leader in the cashback services segment.

TakSebe (and dozens of others) set up ads in Google Adwords for SuberBrand branded query.

SuperBrand is also forced to advertise on Google Adwords for the SuperBrand branded query, otherwise it will lose users, and the cost per click (which Google automatically exposes, depending on demand) will be lower.

Examples are more sophisticated and more complicated than dozens.

# Rose-glasses, TSS and competition
I don’t wear glasses for a long time, because two years ago I tried to enter the competitive niche without UTP with an IT product (cashback service) and lost.

UTP - a unique selling proposition (in English USP, or Unique Selling Proposition).

It was stupid to repeat the same mistake twice, because White Label software did not give any UTP. The same software has already been used by future competitors (the difference is only in design).

Speaking of competitors:

The market is saturated with offers, and top online casinos spend millions of dollars a month to buy traffic within a single GEO, how to compete (or just survive) with them at an early stage, I did not understand.

# Special markets

They discussed the strategy of using the financial capabilities of our partners to enter interesting markets, where competition is also high, but LTV is higher. For example the markets of Turkey, China, Korea. By the way, in Turkey it is forbidden for residents to place bets in online casinos, while residents of the country are gambling. There is a legal conflict that opens doors for companies licensed by Curaçao to the Turkish market, albeit with restrictions.

The idea did not continue to develop further, since starting from unfamiliar markets with insufficient legal regulation is a huge risk.

# Decided to create a business

The idea of ​​creating an online casino did not let go, and the risks of software and traffic need to be covered. I chose the following strategy: create your own CPA grid, gambling crafted under the niche, aggregate traffic (publishers) through it and merge advertisers (offerors) connected to the grid. Connecting large advertisers is not a problem, as some of them are LAWBOOT clients (we will connect several big ones, the rest will come). Finding webmasters with traffic is also not a problem (I don’t waste my time on networking and participation in specialized communities).

Having a CPA net is useful (at a minimum) for two reasons:

• The presence of conditionally “their own” traffic, which can be merged onto its own offer (at an online casino).
• Possession of insights (how traffic converts, what the conversion price is, who, how much and where it buys).

And this is exactly what is missing on the way to creating an online casino.

Soon I will talk about the difficulties that arise with the creation of the CPA grid (also a lot, but it’s easier for me and the team to overcome them, since we have experience in the affiliate marketing niche).